Flex Ltd. (NASDAQ:FLEX) announced on September 3 that it will acquire power conversion systems maker EPC Power in a deal valued at $4.4 billion. The strategic move will increase the contract manufacturer’s exposure to the rapidly growing market for electricity infrastructure serving artificial intelligence data centers.
The transaction is expected to close in the fourth quarter of 2026, after which EPC Power will become part of Flex’s Cloud and Power Infrastructure (CPI) segment. The company expects to finance the acquisition through a combination of debt and equity, with committed financing provided by Citi and Bank of America.
Revathi Advaithi, CEO of Flex, stated:
“A generational shift in power architecture is underway, driven by rising power density and the changing demands of digital infrastructure. EPC Power brings leading power conversion and grid-forming technology that positions us to capitalize on this shift, delivering 800V power conversion today and building towards solid-state transformers. Together with our existing power, cooling and compute capabilities, this transaction expands our ability to design and deliver digital infrastructure as an integrated system.”
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EPC Power Adds New Growth Engines:
EPC Power serves data centers, utility-scale energy storage, and microgrids, giving Flex additional avenues to capitalize on the soaring demand for power infrastructure beyond the AI sector.
Moreover, the acquisition is particularly significant because Flex intends to spin off its CPI business into a standalone public company in the first quarter of 2027. EPC Power’s technologies will help Flex benefit from the shift to next-generation power systems and broaden the portfolio of the planned standalone company.
The financial benefits of the deal are also important. EPC Power is expected to generate around $800 million of revenue in 2026, with organic revenue growth of approximately 40% expected in 2027. At the same time, the company’s EBITDA margin is also projected to expand by double-digit percentage points to approximately 30% next year.
A Costly Bet for Flex:
The $4.4 billion price tag puts substantial pressure on Flex’s balance sheet, and the transaction must generate sufficient incremental earnings and cash flows to justify the valuation. Additionally, the contract manufacturer will need to integrate the acquired technology and operations while also preparing CPI to operate as an independent entity. Any delays or problems in the integration could complicate the spin-off process.
There are also growing concerns of a potential AI bubble. Hyperscalers may be committing to data center investments at a scale and pace that could prove difficult to justify if the economic returns from those projects fall behind expectations. If AI spending is eventually cut back or slowed down, it could significantly weaken the expected growth in power demand.
Conclusion:
Flex’s $4.4 billion acquisition of EPC Power expands its exposure to the rapidly growing power infrastructure market and supports its planned spin-off of the CPI business. However, the deal’s valuation, integration risks, and a potential pullback in AI data center spending could create challenges and limit upside.
Market Sentiment:
Flex Ltd. was held by 94 hedge funds in the Insider Monkey database at the end of Q2 2026, with a total investment value of around $4.1 billion. This is up from 59 hedge fund investors with a total stake value of just over $1.5 billion in the previous quarter.
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This article is originally published at Insider Monkey.
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